INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 1st day of April, 1999, between MUTUAL
QUALIFIED FUND, a series (composed of one or more classes) of FRANKLIN MUTUAL
SERIES FUND INC., a corporation organized under the laws of the State of
Maryland (hereinafter referred to as the "Fund"), and Franklin Mutual Advisers,
LLC (hereinafter referred to as the "Investment Adviser").
In consideration of the mutual agreements herein made, the Fund and
the Investment Adviser understand and agree as follows:
(1) The Investment Adviser agrees, during the life of this
Agreement, to manage the investment and reinvestment of the Fund's assets
consistent with the provisions of the Fund's Charter, By-laws and the
investment policies adopted and approved by the Fund's Board of Directors and
shareholders pursuant to the Investment Company Act of 1940 (the "1940 Act").
In pursuance of the foregoing, the Investment Adviser shall have sole and
exclusive discretion in all determinations with respect to the purchasing and
selling of securities and other assets for the Fund and in voting and
exercising all other rights appertaining to such securities and other assets on
behalf of the Fund, and shall take all such steps as may be necessary to
implement those determinations.
(2) The Investment Adviser is not required to furnish any
personnel, overhead items or facilities for the Fund, including trading desk
facilities or daily pricing of the Fund's portfolio, but personnel employed by
the Investment Adviser may act as officers and/or directors.
(3) The Investment Adviser shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policy and,
when applicable, the negotiation of commissions in connection therewith. All
decisions and placements shall be made in accordance with the following
principles:
(A) Purchase and sale orders will usually be placed with
brokers which are selected by the Investment Adviser as able to
achieve "best execution" of such orders. "Best execution" shall
mean prompt and reliable execution at the most favorable securities
price, taking into account the other provisions hereinafter set
forth. The determination of what may constitute best execution and
price in the execution of a securities transaction by a broker
involves a number of considerations, including, without limitation,
the overall direct net economic result to the Fund (involving both
price paid or received and any commissions and other costs paid),
the efficiency with which the transaction is executed, the ability
to effect the transaction at all where a large block is involved,
availability of the broker to stand ready to execute possibly
difficult transactions in the future, and the financial strength
and stability of the broker. Such considerations are judgmental and
are weighed by the Investment Adviser in determining the overall
reasonableness of brokerage commissions.
(B) In selecting brokers for portfolio transactions, the
Investment Adviser shall take into account its past experience as
to brokers qualified to achieve "best execution", including brokers
who specialize in any foreign securities held by the Fund.
(C) The Investment Adviser is authorized to allocate
brokerage business to brokers who have provided brokerage and
research services, as such services are defined in Section 28(e) of
the Securities Exchange Act of 1934 (the "1934 Act") for the Fund
and/or other accounts, if any, for which the Investment Adviser
exercises investment discretion (as defined in Section 3(a)(35) of
the 0000 Xxx) and, as to transactions for which fixed minimum
commission rates are not applicable, to cause the Fund to pay a
commission for effecting a securities transaction in excess of the
amount another broker would have charged for effecting that
transaction, if the Investment Adviser determines in good faith
that such amount of commission is reasonable in relation to the
value of the brokerage and research services provided by such
broker, viewed in terms of either that particular transaction or
the Investment Adviser's overall responsibilities with respect to
the Fund and the other accounts, if any, as to which it exercises
investment discretion. In reaching such determination, the
Investment Adviser will not be required to place or attempt to
place a specific dollar value on the research or execution services
of a broker or on the portion of any commission reflecting either
of said services. In demonstrating that such determinations were
made in good faith, the Investment Adviser shall be prepared to
show that all commissions were allocated and paid for purposes
contemplated by the Fund's brokerage policy; that the research
services provide lawful and appropriate assistance to the
Investment Adviser in the performance of its investment
decision-making responsibilities, and that the commissions were
within a reasonable range. Whether commissions were within a
reasonable range shall be based on any available information as to
the level of commissions known to be charged by other brokers on
comparable transactions, but there shall be taken into account the
Fund's policies that (i) obtaining a low commission is deemed
secondary to obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to the Fund to obtain
a favorable price than to pay the lowest commission; and (ii) the
quality, comprehensiveness, and frequency of research studies which
are provided for the Investment Adviser are useful to the
Investment Adviser in performing its advisory services under its
Agreement. Research services provided by brokers to the Investment
Adviser are considered to be in addition to, and not in lieu of,
services required to be performed by the Investment Adviser under
this Agreement. Research furnished by brokers through which the
Fund effects securities transactions may be used by the Investment
Adviser for any of its accounts, and not all such research may be
used by the Investment Adviser for the Fund. When execution of
portfolio transactions is allocated to brokers trading on exchanges
with fixed brokerage commission rates, account may be taken of
various services provided by the broker.
(D) Purchases and sales of portfolio securities within the
United States other than on a securities exchange shall be executed
with primary market makers acting as principal, except where, in
the judgment of the Investment Adviser, better prices and execution
may be obtained on a commission basis or from other sources.
(E) Sales of Fund Shares (which shall be deemed to include
also Shares of other registered investment companies which have
either the same adviser or an investment adviser affiliated with
the Fund's Investment Adviser) by a broker are one factor among
others to be taken into account in deciding to allocate portfolio
transactions (including agency transactions, principal
transactions, purchases in underwritings or tenders in response to
tender offers) for the account of the Fund to that broker; provided
that the broker shall furnish "best execution," as defined in
subparagraph A above, and that such allocation shall be within the
scope of the Fund's policies as stated above; provided further,
that in every allocation made to a broker in which the sale of Fund
Shares is taken into account, there shall be no increase in the
amount of the commissions or other compensation paid to such broker
beyond a reasonable commission or other compensation determined, as
set forth in subparagraph C above, on the basis of best execution
alone or best execution plus research services, without taking
account of or placing any value upon such sale of Fund's Shares.
(4) The Fund agrees to pay to the Investment Adviser as
compensation for such services a fee for its services based upon a percentage
of the Fund's average daily net assets, payable at the end of each calendar
month. This fee shall be calculated daily at the following annual rate: .60%
for Mutual Qualified Fund.
Notwithstanding the foregoing, if the total expenses of the Fund
(including the fee to the Investment Adviser) in any fiscal year of the Fund
exceed any expense limitation imposed by applicable State law, the Investment
Adviser shall reimburse the Fund for such excess in the manner and to the
extent required by applicable State law. The term "total expenses," as used in
this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Fund's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Adviser's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Fund's fiscal year if accrued expenses thereafter fall below the limit.
The Investment Adviser may waive all or a portion of its fees
provided for hereunder and such waiver shall be treated as a reduction in the
purchase price of its services. The Investment Adviser shall be contractually
bound hereunder by the terms of any publicly announced waiver of its fee or any
limitation of the Fund's expenses, as if such waiver or limitation were fully
set forth herein.
(5) This Agreement shall become effective on April 1, 1999 and
shall continue in effect through June 30, 2001. If not sooner terminated, this
Agreement shall continue in effect for successive periods of 12 months each
thereafter, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Fund's Board of Directors who are not
parties to this Agreement or "interested persons" (as defined in the 0000 Xxx)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval and either the vote of (a) a majority of the outstanding
voting securities of the Fund, as defined in the 1940 Act, or (b) a majority of
the Fund's Board of Directors as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination
by the Fund is approved by vote of a majority of the Fund's Board of Directors
in office at the time or by vote of a majority of the outstanding voting
securities of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and immediately
in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the Investment
Adviser no longer acts as Investment Adviser to the Fund, the Investment
Adviser reserves the right to withdraw from the Fund the use of the name
"Franklin", "Xxxxxxxxx" or any name misleadingly implying a continuing
relationship between the Fund and the Investment Adviser or any of its
affiliates.
(9) Except as may otherwise be provided by the 1940 Act, neither
the Investment Adviser nor its officers, directors, employees or agents shall
be subject to any liability for any error of judgment, mistake of law, or any
loss arising out of any investment or other act or omission in the performance
by the Investment Adviser of its duties under the Agreement or for any loss or
damage resulting from the imposition by any government of exchange control
restrictions which might affect the liquidity of the Fund's assets, or from
acts or omissions of custodians, or securities depositories, or from any war or
political act of any foreign government to which such assets might be exposed,
or for failure, on the part of the custodian or otherwise, timely to collect
payments, except for any liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Investment Adviser's part or
by reason of reckless disregard of the Investment Adviser's duties under this
Agreement. It is hereby understood and acknowledged by the Fund that the value
of the investments made for the Fund may increase as well as decrease and are
not guaranteed by the Investment Adviser. It is further understood and
acknowledged by the Fund that investment decisions made on behalf of the Fund
by the Investment Adviser are subject to a variety of factors which may affect
the values and income generated by the Fund's portfolio securities, including
general economic conditions, market factors and currency exchange rates, and
that investment decisions made by the Investment Adviser will not always be
profitable or prove to have been correct.
(10) a. The Fund hereby agrees to indemnify the Investment
Adviser and each of the Investment Adviser's directors,
officers, employees, and agents (including any individual who
serves at the Investment Adviser's request as director,
officer, partner, trustee or the like of another corporation)
(each such person being an "Indemnitee") against any
liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees (all as provided in accordance
with applicable corporate law) reasonably incurred by such
Indemnitee in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative
body in which he may be or may have been involved as a party
or otherwise or with which he may be or may have been
threatened, while acting in any capacity set forth above in
this Section 10 or thereafter by reason of his having acted
in any such capacity, except with respect to any matter as to
which he shall have been adjudicated not to have acted in
good faith in the reasonable belief that his action was in
the best interest of the Fund and furthermore, in the case of
any criminal proceeding, so long as he had no reasonable
cause to believe that the conduct was unlawful, provided,
however, that (1) no Indemnitee shall be indemnified
hereunder against any expense of such Indemnitee arising by
reason of (i) willful misfeasance, (ii) bad faith, (iii)
gross negligence or (iv) reckless disregard of the duties
involved in the conduct of his position (the conduct referred
to in such clauses (i) through (iv) being sometimes referred
to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such
Indemnitee, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other
expenses shall be provided unless there has been a
determination that such settlement or compromise is in the
best interests of the Fund and that such Indemnitee appears
to have acted in good faith in the reasonable belief that his
action was in the best interests of the Fund and did not
involve disabling conduct by such Indemnitee and (3) with
respect to any action, suit or other proceeding voluntarily
prosecuted by any Indemnitee as plaintiff, indemnification
shall be mandatory only if the prosecution of such action,
suit or other proceeding by such Indemnitee was authorized by
a majority of the full Board of the Fund.
b. The Fund shall make advance payments in connection with
the expenses of defending any action with respect to which
indemnification might be sought hereunder in the Fund
receives a written affirmation of the Indemnitee's good faith
belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to
reimburse the Fund unless it is subsequently determined that
he is entitled to such indemnification and if the directors
of the Fund determine that the facts then known to them would
not preclude indemnification. In addition, at least one of
the following conditions must be met: (A) the Indemnitee
shall provide a security for his undertaking, (B) the Fund
shall be insured against losses arising by reason of any
lawful advance, or (C) a majority of a quorum consisting of
directors of the Fund who are neither "interested persons" of
the Fund (as defined in Section 2(a)(19) of the Act) nor
parties to the proceeding ("Disinterested Non-party
Directors") or an independent legal counsel in a written
opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Indemnitee
ultimately will be found entitled to indemnification.
c. All determinations with respect to indemnification
hereunder shall be made (1) by a final decision on the merits
by a court or other body before whom the proceeding was
brought that such Indemnitees is not liable by reason of
disabling conduct or, (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested
Directors of the Fund, or (ii) if such a quorum is not
obtainable or even, if obtainable, if a majority vote of such
quorum so directs, independent legal counsel in a written
opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall
be authorized shall be made in accordance with the
immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions shall
not exclude any other right to which he may be lawfully entitled.
(11) It is understood that the services of the Investment Adviser
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Adviser, or any affiliate thereof, from providing similar services
to other investment companies and other clients, including clients which may
invest in the same types of securities as the Fund, or, in providing such
services, from using information furnished by others. The Fund acknowledges
that the Investment Adviser renders services to others, that officers and
employees of the investment adviser invest for their own accounts, and the Fund
is not entitled to, and does not expect, to obtain the benefits of any
investment opportunities developed by the Investment Adviser such officers or
employees in which the Investment Adviser acting in good faith, does not cause
the Fund to invest.
(12) This Agreement shall be construed in accordance with the laws
of the State of Delaware, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(13) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(14) Nothing herein shall be construed as constituting the
Investment Adviser an agent of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized officers and their respective corporate
seals to be hereunto duly affixed and attested.
MUTUAL QUALIFIED FUND, a series of
FRANKLIN MUTUAL SERIES FUND INC.
By:/s/Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Vice President &
Secretary
FRANKLIN MUTUAL ADVISERS, LLC
By:/s/Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Secretary
